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Policy Brief An electronic publication of The Allegheny Institute for Public Policy http://alleghenyinstitute.org :June 21, 2006 Volume 6, Number 31 Gubernatorial Jobs Hype Rings Hollow One thing in state politics is certain. The poorer the state�s jobs performance, the more extravagant will be the claims made about how good the numbers are. Case in point. Pennsylvania added 800 non-farm payroll jobs (based on the business establishment survey) in May bringing the total increase since January to 3,700. That�s an almost imperceptible 0.06 percent gain for the four-month period. Or looked at another way, this year�s pace of job growth represents a sharp drop from the state�s mediocre growth rate recorded in 2004 and 2005. Yet the Governor says in his June 19 press release in reference to the May figures, �That is great news for workers and businesses because it means our economic investments are attracting new businesses and encouraging others to expand.� Non-Farm Payroll Job Growth, 2003-2006 State January 2003-May 2006 (% Change) May 2005-May 2006 (% Change) Pennsylvania 2.1 0.8 North Carolina 4.5 2.1 South Carolina 5.2 2.7 Virginia 6.3 1.6 Texas 5.9 2.6 Georgia 6.0 2.1 U.S. 3.7 1.4 The reality is that since the Governor took office in January 2003, Pennsylvania jobs are up at half the national rate and a third or so of the rate posted in Southern Right-to-Work states such as Georgia, Virginia, North Carolina, South Carolina and Texas. Moreover, those states have continued to show job gains throughout 2006, as has the nation as a whole. Most telling of all is the fact that Pennsylvania�s private sector jobs in May 2006 stood a scant 2,600 above the pre-recession peak set in February 2001. This represents an embarrassingly small, miniscule rise of less than half of one percent in more than five years. This has happened despite the fact that the state has poured over $1.7 billion into economic investments to promote job gains since 2003. As we have noted previously, Pennsylvania's employment growth over the last couple of years has been driven in large measure by three sectors: health care and education, leisure and hospitality, and professional services. All told, the three expanding sectors together account for virtually all the total pickup in payroll employment over the last couple of years. Ironically, these sectors have not been particularly favored by the state�s �economic investment handout� programs. Obviously, employment in health and education is heavily influenced by federal and state programs other than �economic investments.� Nor have the other two faster growing sectors been major recipients of the recent spate of state handouts. Their growth reflects market demand driven in large part by a strengthening national economy. Further undermining the Governor's claims about the strength of the state�s jobs picture, the data from the household employment survey (the Labor Department�s other gauge of the labor situation) depict a very weak labor market. The Pennsylvania household survey statistics place the pre-recession labor force and jobholder peak in April 2002, just over four years ago. Since that time, Pennsylvania's labor force has edged higher by 53,231 workers, an increase of 0.8 percent or a tiny 0.2 percent per year. Meanwhile, over the same period, the number of jobholders rose 1.7 percent or a very anemic 0.4 percent per year. Unfortunately, the story gets worse. From May 2005 to May 2006, Pennsylvania�s labor force total was essentially unchanged while the jobholder count increased a paltry 0.2 percent. These figures should be a source of real concern for Pennsylvania�s elected officials, not something to brag about. A look at Georgia's labor force and jobholder gains over the same time intervals should once and for all convince elected officials to abandon their everything is great posturing. In Georgia, the labor force has climbed a very robust 8.5 percent since April 2002 while jobholders rose an even stronger 8.9 percent. Unlike Pennsylvania, there is no evidence of a slowing in the growth rate over the last 12 months with the labor force up 2.1 percent and jobholders up 3.0 percent from May 2005 to May 2006. What's worse from Pennsylvania�s viewpoint, Georgia is not the fastest growing Right-to-Work state. All these comparative state job statistics tell us one more time, as if we really need reminding, that Pennsylvania's top down, government driven, directed and financed economic development strategy is a hopeless failure. Thus, the Governor�s veto of a small business tax cut earlier this year is doubly ironic. The veto was exercised purportedly because the state couldn't afford the lost revenue. Amazing. The state has hundreds of millions to handout to its favorite projects but can�t spare $50 million for a tax cut. The question is: Will the state government ever tire of trying to manage growth notwithstanding the decades of proving over and over that it cannot make growth happen by subsidizing some businesses while taking tax dollars from others to do it? It seems likely that Pennsylvania will continue to watch other fast growing states prosper with solid employment and income gains while it attempts to play catch up with government investments. Or, if a miracle occurs in state government, the state might actually enact lower business taxes and a Right-to-Work law as a start down the path of curing itself of European style economic malaise. Source :Jake Haulk, Ph.D., President, http://alleghenyinstitute.org/blog. :If you have enjoyed reading this Policy Brief and would like to send it to a friend, please feel free to forward it to them. For more information on this and other topics, please visit our website: alleghenyinstitute.org. If you wish to support our efforts please consider becoming a donor to the Allegheny Institute. The Allegheny Institute is a 501©(3) non-profit organization and all contributions are tax deductible. Please mail your contribution to: :The Allegheny Institute, 305 Mt. Lebanon Boulevard, Suite 208, Pittsburgh, PA 15234 Policy Brief An electronic publication of The Allegheny Institute for Public Policy alleghenyinstitute.org September 25, 2006 Volume 6, Number 50 Pittsburgh Job Growth Soft: Complaints Loud and Misplaced State labor department officials tried to make good news out of the Pittsburgh area jobs report for August. They point to a 0.7 percent increase in jobs from the 12 month ago level. Unfortunately, that�s only half the national rate and small indeed compared to faster growing states. The same states that are the principal destinations of Pittsburghers and Pennsylvanians who have opted for greener pastures elsewhere. The metro area's lackluster jobs performance is even more worrisome than the meager 7,000 year- over- year pickup in private sector employment suggests. As has been the pattern statewide and locally for several months, private sector employment gains are almost exclusively confined to the health and education along with the leisure and hospitality establishments. Manufacturing continues to shed jobs and now employs fewer people than either health care, retail trade or leisure and hospitality firms. This, despite the fact that retail jobs are still 5,000 below the August 2000 level. Perhaps more telling is the lack of gains in construction with August�s job count unchanged from a year ago and actually lower than the three-year ago reading. Suffice to say that without the health care sector and eating and drinking places adding workers, Pittsburgh metro employment would not be rising at all. This is a dreadful commentary about the area in light of the national economic expansion that has been underway for four years. No doubt federal tax cuts, low inflation and low interest rates have been able to spur the national economy as well as the economy of states with the business climates along with the economic freedom and flexibility to take advantage of the favorable national tax and monetary policies. Thus, it is interesting that many people in Pittsburgh and Pennsylvania complain endlessly about how Washington is to blame for the poor economy in the region and state while many states are growing at a very fast pace. How can that be explained if Washington�s economic policies are so terrible? More fascinating still is many of these same folks give credence to the claims by elected officials who take credit for a �good� economy in Pennsylvania. Obviously, this falls under the heading of being able to believe two mutually exclusive arguments. As long as sizable portion of the electorate clings blindly and tenaciously to state economic and labor policies that have long since been proven to be counterproductive, policy makers will have no incentive to make the hard choices needed to end bad policies and implement better ones. Eliminating prevailing wage, enacting Right to Work and ending teacher and transit worker strikes would be an excellent start. Cutting the corporate net income tax, eliminating the capital stock and franchise tax, and adopting a no limit loss carry forward provision would also be an excellent first step. Doing all these things could bring the resurgence of Pennsylvania as a national growth leader, dynamic and strong, the way it should be. Then we could do away with the irrational policy of giving taxpayers� money to retail mall developers. Sadly, trusting the private sector and free markets comes hard to Pennsylvania�s government as the obstinate resistance to ending image-destroying teacher strikes and reforming Act 111 clearly demonstrates. Jake Haulk, Ph.D., President Please join us for a conference on Improving The Western Pennsylvania Economy on Thursday September 28th. Panel discussions will address the problems of the state�s pro-union laws, tax problems faced by Pennsylvania's business, and how business leaders can help advance important initiatives. Speakers will include Pat Toomey from the Club for Growth, national public sector union expert David Denholm, and Jim Roddey, the first elected Chief Executive of Allegheny County. The conference will be held at the Pittsburgh Athletic Association in Oakland from 8:30AM to 12:30PM. For more information please contact us at 412.440.0079. Please visit our blog at alleghenyinstitute.org/blog. If you have enjoyed reading this Policy Brief and would like to send it to a friend, please feel free to forward it to them. For more information on this and other topics, please visit our website: alleghenyinstitute.org. If you wish to support our efforts please consider becoming a donor to the Allegheny Institute. The Allegheny Institute is a 501©(3) non-profit organization and all contributions are tax deductible. Please mail your contribution to: The Allegheny Institute 305 Mt. Lebanon Boulevard Suite 208 Pittsburgh, PA 15234 Thank you for your support. A.I.